Recent Developments

By Martin M. Shenkman, CPA, MBA, JD

■ RMD: You won’t have to take a distribution from your IRA for 2009 because the Required Minimum Distributions (RMDs) have been suspended for this year only. In Notice 2009-82, 2009-41 I.R.B. 491 the IRS addressed a number of issues created by the waiver of 2009 RMDs. Because these rule changes were enacted so late in the year, the IRS has provided some leniency to taxpayers. The IRS won't consider a plan to have failed to be operated according to its terms merely because, between 1/1/2009 and 11/30/2009, 2009 RMDs were or were not made, beneficiaries weren't given option of not receiving distributions that included 2009 RMDs, or direct rollover option was or wasn't offered for 2009 RMDs. For taxpayers who have already received 2009 RMDs, the IRS extended the normal 60-day rollover period so that it doesn’t end before 11/30/2009. Thanks to Charles C. Shulman, Esq. Teaneck, NJ.

 

■ Innocent Spouse Relief: When spouses file a joint income tax return they are both jointly and severally on the hook for any tax.  If certain requirements are met one spouse might qualify for relief from the tax attributable to the other spouse under IRC Sec. 6015: ◙ H&W filed a joint return; ◙ There was an understatement of tax due to an erroneous item of H; ◙ W didn’t know, and had no reason to know, of H’s understatement; ◙ It’s inequitable to hold W liable for the tax based on all the facts and circumstances; and ◙ W elects innocent spouse relief within two years of the IRS beginning collection. Linda Bruen , TC Memo 2009-249 (Tax Ct.)

 

■ Expatriates: Benjamin Franklin uttered the famous phrase in 1817: “In this world nothing can be said to be certain, except death and taxes." Well expatriating to avoid the taxes probably won’t work either. In Notice 2009-85 the IRS explained the new Code Sec. 877A mark-to-market exit tax enacted as part of the “Heroes Earnings Assistance and Relief Tax Act” (HEART) in 2008. The tax can be on the unrealized appreciation of those assets over $600,000 (inflation indexed). If you receive a gift or bequest from an expatriate on or after June 17, 2008 you may face a tax under Code Sec. 2801 at the highest marginal gift or estate tax rate on the fair value of the property. But since the Notice was only 65 pages long it only addressed the 877A provisions, you’ll have to wait guidance on the 2801 rules.